Time to warm up to value investing

Oct 28 2013, 08:46 IST
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Value investing is one of the most popular investment themes globally. Value investing is one of the most popular investment themes globally.
SummaryValue investing strategy focuses more on the fundamentals of business and the company.

and 2009-2010 were the best years to sell equities and book profits. On that basis, the current scenario appears to be a good time to look at value opportunities based on investing for the long term.

Value makes eminent sense considering the fact that currently, there are only about 10-12 stocks which are overvalued. The rest of the market is available at extremely attractive prices. Most fundamentally strong stocks are available at single digit PEs (price to equity) and with price to book below one. We think value is a far bigger opportunity than any other theme at this point of time.

While global challenges will need to unfold based on measures taken by administrations of other countries, domestic challenges, the most compelling one of which is continuation of the reforms process, will crystallize post the 2014 union elections. The positive aspect to the elections in terms of reforms is that both parties, the current government in rule and the opposition, have understood that reforms have to continue in order for the country to retain and nurture foreign interest in the form of FDI and other investment inflows. Hence, using the value strategy in the current scenario makes compelling sense.

The above reasons clearly indicate that the current scenario is apt for locating through sound research value stocks. A better option would be to invest in professionally managed value-styled mutual funds. They would not only help capture the upside that the underlying stocks offer when the market phase changes for the better but would also cushion the downside in a volatile phase.

To conclude, one may recall what investment guru Warren Buffett once said, “It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price,” which probably best sums up the essence of value investing.

The right value

Value investing hinges on investing in undervalued but fundamentally strong companies. While value investing is an opportunity to profit by buying the stock when it is underpriced, it is not just laying your hands on every undervalued stock

Important stock indicators considered for value investing are PE ratio, PBV ratio, PEG ratio, and dividend yield. While for dividend yield, the higher the number the better it is, for the remaining factors, the lower the number, the better it is

The current scenario appears to be a good time to look at value opportunities. We are going to approach

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